Drug prices will plummet as patents expire

?The cost of prescription medicines used by millions of people every day is about to plummet.

The next 14 months will bring generic versions of seven of the world’s 20 best-selling drugs, including the top two: cholesterol fighter Lipitor and blood thinner Plavix.

The magnitude of this wave of expiring drugs patents is unprecedented.

Between now and 2016, blockbusters with about $255 billion in global annual sales will go off patent, according to EvaluatePharma Ltd., a London research firm. Generic competition will decimate sales of the brand-name drugs and slash the cost to patients and companies that provide health benefits.

Top drugs getting generic competition by September 2012 are taken by millions every day: Lipitor alone is taken by about 4.3 million Americans and Plavix by 1.4 million. Generic versions of big-selling drugs for blood pressure, asthma, diabetes, depression, high triglycerides, HIV and bipolar disorder also are coming by then.

The flood of generics will continue for the next decade or so, as about 120 brand-name prescription drugs lose market exclusivity, according to prescription benefits manager Medco Health Solutions Inc.

To find out which brand-name drugs are going off patent through 2015, go to: http://www.medcohealth.com/art/corporate/anticipatedfirsttime_generics.pdf.

“My estimation is at least 15 percent of the population is currently using one of the drugs whose patents will expire in 2011 or 2012,” said Joel Owerbach, chief pharmacy officer for Excellus Blue Cross Blue Shield, which serves most of upstate New York.

Those patients, along with businesses and taxpayers who help pay for prescription drugs through corporate and government prescription plans, collectively will save a fortune because generic drugs typically cost 20 percent to 80 percent less than the brand names.

Doctors hope the lower prices will significantly reduce the number of people jeopardizing their health because they can’t afford the medicines they need. Even some people with private insurance or Medicare aren’t filling all their prescriptions, studies show, particularly for cancer drugs with copays of hundreds of dollars or more.

Generic medicines are chemically equivalent to the original brand-name drugs and work just as well for nearly all patients. When a drug loses patent protection, often only one generic version is on sale for the first six months, so the price falls a little bit initially. Then, several other generic makers typically jump in, driving prices down dramatically.

Last year, the average generic prescription cost $72, versus $198 for the average brand-name drug, according to consulting firm Wolters Kluwer Pharma Solutions. Those figures average all prescriptions, from short-term to 90-day ones. Average copayments last year were $6 for generics, compared with $24 for brand-name drugs given preferred status by an insurer and $35 for non-preferred brands, according to IMS Health.

Among the drugs that recently went off patent, Protonix, for severe heartburn, now costs$16 a month for the generic, versus about $170 for the brand name. And of the top sellers that soon will have competition, Lipitor retails for about $150 a month, Plavix costs almost $200 a month and blood pressure drug Diovan costs about $125 a month. For those with drug coverage, their out-of-pocket costs for each of those drugs could drop below $10 a month.

For people with no prescription coverage, the coming savings on some drugs could be much bigger. Many discount retailers and grocery chains sell the most popular generics for $5 a month or less to draw in shoppers.

The impact of the coming wave of generics will be widespread — and swift because insurers make sure patients are switched to a generic the first day it’s available.

Many health plans require newly diagnosed patients to start on generic medicines. And unless the doctor writes “brand only” on a prescription, if there’s a generic available, that’s almost always what the pharmacist dispenses.

“A blockbuster drug that goes off patent will lose 90 percent of its revenue within 24 months. I’ve seen it happen in 12 months,” said Ben Weintraub, a research director at Wolters Kluwer Pharma Solutions.

The looming revenue drop is changing the economics of the pharmaceutical industry.

In the 1990s, big pharmaceutical companies were wildly successful at creating pills that millions of people take every day for long-term conditions, from heart disease and diabetes to osteoporosis and chronic pain. The patents on those blockbusters, which were filed years before the drugs went on sale, last for 20 years at most, which is why many expire soon.

Drug companies have received U.S. approval for 20 drugs this year and expect approval for other important ones the next few years. Eventually, those will help fill the revenue hole. For now, brand-name drugmakers are scrambling to adjust for the billions in expected revenue loss. They’ve cut about 10 percent of U.S. jobs in four years and they’re trying to grow sales in emerging markets such as China and India.

As the proportion of prescriptions filled with generic drugs jumped to 78 percent in 2010, from 57 percent in 2004, annual increases in prescription drug spending slowed, to just 4 percent in 2010. According to the Generic Pharmaceutical Association, generics saved the U.S. health care system more than $824 billion from 2000 through 2009, and now save about $1 billion every three days.

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